Thursday, May 21, 2015

City Achieves Highest Credit Rating Possible

Long time no blog....;-)

To me, the most important aspect of this is a bit buried in the release, so I highlighted it in yellow. It's going to save us, the taxpayers, money when we need to borrow. And like any properly functioning business, a municipality will need to borrow from time to time for capital projects.

City Achieves Highest Credit Rating Possible

Posted on: May 21, 2015 - 8:37am

City Bond Rating Upgraded to AAA

City Achieves Highest Credit Rating Possible—First Time in City History

Mayor Donna D. Holaday is pleased to announce that on Wednesday, May 20, 2015, the City was notified that it had achieved the highest possible municipal bond rating of Triple A (AAA) from the national rating agency, Standard & Poor’s (S&P). This rating represents an upgrade from the rating of AA+, issued to the City in 2014 by S&P. This new long-term rating increase places Newburyport among the ranks of the top communities across the country for credit worthiness and financial management. The upgraded credit quality of Newburyport will allow the City to issue debt at lower interest rates, saving the City in future borrowing costs.

According to the S&P report, assigning the City of Newburyport the highest possible bond rating is based on the City’s, “…very strong management as well as stronger wealth and income indicators.” They cited the following favorable factors for the City in making their determination:

Very strong economy, with access to a broad and diverse metropolitan statistical area (MSA);

Very strong management, with "strong" financial policies;

Strong budgetary performance, with a slight operating surplus in the general fund and balanced operating results at the total governmental fund level;

Strong budgetary flexibility, with an available fund balance in fiscal 2014 of 11% of operating expenditures;

Very strong liquidity, with total government available cash of 29.1% of total governmental fund expenditures and 5.4x governmental debt service, and access to external liquidity we consider strong;

Strong debt and contingent liability position, with debt service carrying charges of 5.4% and net direct debt that is 74.3% of total governmental fund revenue and low overall net debt at less than 3% of market value; and

Strong institutional framework score.

In learning of the news from S&P, Mayor Holaday stated, “I am delighted to receive such great news for our City at this particular time as we’re working out our FY16 budget. Since taking office, I committed the City to a multi-year financial management strategy intended to move us in this very direction—and now we have realized one of our ultimate goals—to achieve the highest bond rating possible . The support of the City Council over the past five years in aligning with the Executive Office’s overall budgetary strategy has played a crucial role in getting us to this point. I thank them for their continued commitment to these sound fiscal policies which have clearly paid off with our newly-deemed credit status.”

According to the City’s Financial Advisor, FirstSouthwest , there are roughly 58 communities out of 351 in Massachusetts that have a AAA bond rating—the majority of which are towns.
As for the future, S&P reported that, Newburyport’s financial outlook appears to be stable. In their report they note, “The stable outlook reflects our opinion that the city will maintain its at least strong financial position through balanced operations. The city’s very strong wealth and income levels and the diverse and dynamic local and regional economies support the rating. We further expect the Newburyport’s debt profile to remain strong as its future capital needs are limited and that management's policies will support long-term stability. We are unlikely to revise the rating during our two-year horizon as we believe the capable management team will maintain the city’s strong financial performance and preserve at least strong reserves. While unlikely, a sustained or substantial weakening of reserves and liquidity could put downward pressure on the rating.”

S&P’s full report is expected to be made publicly available by the end of this week.